Korea’s June inflation below 3% for first time in 21 months on lower oil prices

[Photo by Lee Seung-hwan]

South Korea’s inflation fell under 3 percent for the first time in 21 months in June as the gain slowed for five straight months on reduced inflationary pressure from a sharp decline in oil prices.

According to Statistics Korea on Tuesday, the country’s consumer price index (CPI) rose 2.7 percent year over year in June, staying under the 3 percent level for the first time since 2.4 percent in September in 2021.

CPI jumped 5 percent in December last year before rising slightly to 5.2 percent in January this year. The gain slowed to 4.8 percent in February, 4.2 percent in March, 3.7 percent in April, and 3.3 percent in May.

Living necessities price index jumped 2.3 percent in June from a year ago, easing from a gain of 3.2 percent in May. It is the first time in 27 months that the index remained under 3 percent.

“The overall consumer price gain fell to the 2 percent range for the first time since September 2021 as oil prices fell and the growth in the service sector slowed,” said an unnamed official from Statistics Korea.

By item, petroleum prices fell 25.4 percent in June from a year ago, the steepest decline since the agency began compiling related data in January 1985.

Diesel prices fell 32.5 percent, gasoline prices 23.8 percent, and automotive LPG prices 15.3 percent.

Petroleum products’ contribution to the entire CPI stood at -1.47 percentage points.

Electricity, gas, and water prices, on the other hand, rose 25.9 percent in June from a year ago. Service prices rose 3.3 percent on a 6.3 percent surge in the price of dining out.

Prices of agricultural, livestock, and fishery products rose 0.2 percent in June from a year ago.

Prices of ramyeon, or instant noodles, soared 13.4 percent as a decline in the factory price from July has not yet been reflected.

The core CPI that counts out volatile food and energy factors rose 4.1 percent in June, the lowest since 4.1 percent in May last year.

“Prices are likely to stabilize until July given the base effect,” said an official from Statistics Korea. “The decline may slow in the second half as there are upward factors such as international raw materials prices and exchange rate as well as downward factors depending on the domestic economy.”